Tuesday, March 13, 2007

Chuan Hup - latest development

Chuan Hup - latest development

Dear friends,

As you might already know, I participate quite actively in wallstraits.com forum. The following is an extract of my posting about the latest development on Chuan Hup....


Originally posted by Old Friend

Hi Limfuchin san,
Understand from your previous post or your website that Chuan Hup is still undervalued at 34cts. Now, with a takeover offer at 34cts on the table (see attached link), what is your views on Chuan Hup now?
Thanks in advance! :)
Dear Old Friend,

Thanks for the note.I was wondering why it halted trading, could be good news or bad news, right?

Then began my adventure....

Firstly, what I did was to do a rojak analysis comparing to its competitors (I used Courage Marine, Samudera Shipping and Singapore Shipping). It is really at face value, as in I look at only the competitors' P/E and book value.

The conclusion is quite sad... I find its comparative fair value to be only $0.21. Not wanting to give up, I dig up on the "Available-for-sale investment", which looks like a 'suspect' of hidden value. In its 2006 report, it is stated as US$218.151 mil.

When I dig further, oh my god, I do not remember that it has so many associated and subsidary companies! Directly held by the company is already 23 of them (I suspect some are just dormant companies) ! So, I zoomed in to those that I can find more and found these 3... PCI(32.69%), CH Offshore(32.12%) and Scomi Marine(28.92%).

To cut the story short, the combined net asset value of the 3 companies above is already US$214.42! Ya, so what right?

So, assuming that most of its *non-dormant* associated and subsidary companies are profitable, I highly suspect that its statement of US$218.151 is now very much undervalued.

The next question is, it is understated by how much? Due to lack of experience and knowledge, I am unable to give an accurate estimate... However, a simple simulation show that, for every US$100mil of understatement of its investment, its per share net asset value will go up by US$0.09. Also, all the 3 companies listed above are making monies...

My final opinion is that it should be worth more that $0.34... its most recent declared net asset value is US$0.2692 (about SG$0.4038)....

So, what do you guys think leh?

Warm regards,
Fu Chin


Disclaimer: Completeness, accuracy and opinions based on information and comments mentioned via this website cannot be guaranteed. Investors should always conduct their own research before making investment decisions.


Anonymous said...

there are lots of company for us to choose why choose one that always burn the share holder, as we all know these are the kind of company like in the past acma , ambassador, etc etc, it's better if you look into company with very stable management , like SIAE, or HPL.....

Lim Fu Chin said...

Dear Anonymous,

Thank you for leaving the note and sharing your experiences.

I totally agree with you that a stable and competent management is one of the (many) key criterias in choosing good investments.

This is one of my weakness when faced with how to decide whether the management is good.

So, would you like to share what are the things you consider in analysing / deciding what would make a good management for a company?

Thanks again for sharing your experiences...

Warm regards,

Anonymous said...

as a number of ppl are following your tread, it's very important not to lead them with weak counters, i like your analyse, but i hope you pick stronger company or better still counters above $3?
as when the market falls it's very difficult to recover, i prefer if you look at siae or sino env, or semb marine etc . like you did on smrt